Hong Kong is a Special Administrative Region of China, and India has treated Hong Kong together with China for Press Note 3 (2020). When the Cabinet approved the 2026 easing on 10 March 2026, a DPIIT official was reported to have said that firms registered in China and Hong Kong still need prior government approval, and that the 10% passive-ownership relief is only for entities from non-land-border countries. A Hong Kong-incorporated company that invests in India should therefore plan on the government route, whoever owns it, and take written Indian advice before assuming otherwise.
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Key facts
| Rule | Press Note 3 (2020): investment by an entity of a country sharing a land border with India, or where the beneficial owner is a citizen of such a country, needs prior Government approval |
|---|---|
| Hong Kong | Treated with China in the policy; commentary says Hong Kong vehicles are not exempt or grandfathered. Confirm with Indian counsel |
| 2026 easing | Cabinet approved on 10 March 2026; Press Note 2 (2026 series); FEMA rules reported as amended on 1 May 2026 |
| Who the easing helps | Entities from non-land-border countries with up to 10% passive, non-controlling land-border beneficial ownership |
| Government statement (reported) | Firms registered in China and Hong Kong still need prior approval; no relaxation for entities or investors in land-border countries |
| Fast track | 60-day target for specified manufacturing sectors (reported as capital goods, electronic capital goods, electronic components, polysilicon, ingot-wafer) |
| Directors | Citizens of land-border countries need Ministry of Home Affairs clearance before appointment |
| Practical rule | Plan for months of approval time unless your sector is in the fast track |
Why Hong Kong companies are caught
Press Note 3 was written for countries sharing a land border with India. Commentary on the 2020 and 2026 notes treats Hong Kong-incorporated entities as grouped with China, and the government's public statement after the March 2026 Cabinet decision, as reported, named both China and Hong Kong. A Hong Kong holding or regional company owned by Western, Japanese, Indian or other non-Chinese shareholders is therefore not automatically on the Automatic Route. Obtain a written view from Indian counsel on your exact facts, because the beneficial-owner test in the 2026 amendments and the place-of-incorporation test work differently.
Who is in which position
| Investor | Position | What to do |
|---|---|---|
| Hong Kong-incorporated company, any ownership | Treat as requiring prior approval, based on the reported government statement and commentary | Apply on the government route, or restructure with advice |
| Non-Hong Kong group company with up to 10% passive Chinese or Hong Kong beneficial ownership | Automatic Route with reporting, if no control rights | Confirm the cap table and governance rights |
| Non-Hong Kong group company with Chinese or Hong Kong beneficial owners above 10%, or with control | Prior approval required | Map the ownership chain |
| Hong Kong company owned by Indian residents or NRIs | Check separately: place-of-incorporation analysis and the overseas investment rules both matter | Take Indian advice before investing back into India |
| Listed company or multilateral institution | Excluded from the beneficial-owner look-through, as reported | Confirm the exemption wording |
The approval route in practice
- Confirm the sector cap in the FDI Policy; Press Note 3 adds approval and does not lift sector bans.
- Prepare the file: ownership chart to the ultimate natural persons, audited financials, business plan, product and technology details and the proposed Indian shareholding.
- Apply on the DPIIT Foreign Investment Facilitation Portal. The proposal goes to the relevant ministry and the Ministry of Home Affairs.
- Answer queries quickly; delays usually come from unclear ownership or sensitive technology.
- Incorporate and fund within the approved terms, then report to the RBI. A change to the approved structure may need fresh approval.
Structuring points for Hong Kong groups
- Regional headquarters: many groups use a Hong Kong company as the Asian holding or trading entity. If it will hold the Indian subsidiary, build approval time into the plan.
- Holding through another entity: where a group has a genuine non-Hong Kong, non-land-border entity that can own the Indian subsidiary, that can change the analysis. The reason must be commercial and the ownership must be disclosed. Do not contrive a structure only to avoid the note.
- Existing Indian investments held via Hong Kong: later transfers, restructurings and new capital may need approval. Check before moving shares.
- Beneficial owner disclosure: Indian banks, the Registrar and the RBI forms ask for ultimate owners. Keep the ownership chart and identity papers ready.
- Control rights: board seats, vetoes, observer rights and side letters can amount to control even where the percentage is small.
Timeline and risk
Approvals have taken months, and several hundred proposals were reported as pending before the 2026 change. A 60-day target is reported for specified manufacturing sectors. Investing before approval is a FEMA contravention that can lead to penalties, compounding or unwinding. Sequence the approval before incorporation and funding. See incorporation steps and funding and FEMA.
Related rules
- Procurement, customs and origin rules for goods routed through Hong Kong: goods via Hong Kong
- The tax treaty has its own anti-abuse test: India-Hong Kong DTAA
- Using Hong Kong as a regional hub: regional hub guide
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, Inland Revenue Department (Hong Kong), Companies Registry (Hong Kong) and the Ministry of External Affairs (India).
Frequently asked questions
Does a Hong Kong company need government approval to invest in India?
Treat it as yes. India has treated Hong Kong with China for Press Note 3, and after the March 2026 Cabinet decision a DPIIT official was reported to say that firms registered in China and Hong Kong still need prior approval.
Does the 2026 easing help a Hong Kong parent?
No, as reported. The 10% passive-ownership route is for entities from non-land-border countries with minority land-border beneficial owners.
My Hong Kong company is owned by non-Chinese shareholders. Do I still need approval?
The reported government position is that Hong Kong-registered firms need approval. Take written advice from Indian counsel on your facts before assuming otherwise.
Can I invest through a non-Hong Kong group company instead?
That can change the analysis if the entity is genuine, non-land-border and has no controlling land-border ownership. The structure must be commercial and disclosed.
How long does Press Note 3 approval take?
Historically months. A 60-day target is reported for specified manufacturing sectors.
Do Chinese or Hong Kong directors need clearance?
A citizen of a land-border country proposed as a director needs Ministry of Home Affairs security clearance.
What happens if I invest without approval?
It is a FEMA contravention, with penalties and the possibility of compounding or unwinding. Obtain approval first.
Related guides
Hong Kong as a Regional Headquarters for India: Holding Company, Trading Hub, Treasury and the Principal Purpose Test
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Read the guide →How to Incorporate a Private Limited Company in India as a Hong Kong Parent: Approval, SPICe+, Bank Account and Post-Incorporation Filings
Step-by-step route for a Hong Kong parent to set up an Indian private limited company: Press Note 3 approval, name, SPICe+, DIN and DSC, resident director, PAN and TAN, bank account, capital inflow, FC-GPR and first filings.
Read the guide →Shipping Goods Through Hong Kong to India: Country of Origin, Customs Valuation, Anti-Dumping and Government Procurement Rules
What Hong Kong traders must know when goods go to India: origin versus port of shipment, no India-Hong Kong trade agreement, customs value on related-party sales, anti-dumping duty on Chinese-origin goods, BIS standards and public procurement limits.
Read the guide →Twelve Common Mistakes Hong Kong Companies Make in India and How to Avoid Them
The most common mistakes of Hong Kong companies entering India: skipping Press Note 3, thin hub structures, late FEMA filings, weak treaty paperwork, secondment tax errors, stale apostilles, unstamped contracts and ignoring the Indian calendar.
Read the guide →Sources
Last updated 26 October 2026. General information only, not legal or tax advice. Indian and Hong Kong rules change often; confirm current requirements before acting.